MIND OF A CHARACTER – Euphoria Star Sydney Sweeney on the Art of a Bathtub Breakdown – This Car Comes With an NFT (And No, It Isn’t a Bored Ape Picture) – Tech Companies Face a Fresh Crisis: Hiring – Recruiters in tech are desperate for workers. But candidates are the ones who hold all the power.
Todays TextileFuture Newsletter Edition will allow you three different stories. Each of these are offering insights of value and actuality.
The first item is entitled “MIND OF A CHARACTER – Euphoria Star Sydney Sweeney on the Art of a Bathtub Breakdown” it is a contribution by guest author Lane Florsheim from the Wall Street Journal and of high interest.
The second feature bears the title “This Car Comes With an NFT (And No, It Isn’t a Bored Ape Picture)”, and it is on the newest Alfa Romeo and NFTs and consist mostly of a Video, composed by George Downs, also from the Wall Street Journal.
As the first two items are quickly read, we add the “piece de resistance” from McKinsey. It is entitled “Reversal of fortune: How European software can play to its strengths”, it is on how European software can develop in the future.
We feel very sure that these items, as diverse as they are, will offer you reading and educational background.
Have an excellent business week and a great day!
Here starts the first item:
MIND OF A CHARACTER – Euphoria Star Sydney Sweeney on the Art of a Bathtub Breakdown
By guest author Lane Florsheim from the Wall Street Journal
Sydney Sweeney doesn’t stay in character between scenes on the Euphoria set, but when she’s filming, she loses herself completely to playing Cassie Howard. “Sometimes I don’t even remember filming something because I’m so engrossed in the character,” says Sweeney, 24.
The HBO show’s second season has played out as a series of humiliations for Cassie, a fragile high schooler who seeks out love and validation in mostly unhealthy ways. Cassie hooks up with her best friend’s ex-boyfriend, then hides, terrified, in a bathtub to avoid getting caught; wakes up at 4 a.m. to prepare to see said hookup at school before being outright ignored by him; drunkenly dances and sings, crying, alone in a room and wearing only a swimsuit during a birthday party, then vomits into a hot tub. Numerous additional tear-filled breakdowns occur along the way.
None of it feels vulnerable to Sweeney herself, though. “I’m able to just jump in and out…. [I] basically break away all walls of protection,” she says of navigating the challenge of on-screen breakdowns. “It’s a very healthy method for me, because if I had to stay in that mindset before [scenes], I don’t think I’d be able to go home as Syd in the healthy way.”
Sweeney was born and raised in Spokane, Washington, and after presenting a PowerPoint to her family that included a five-year plan on how she would become an actor, moved with them to Los Angeles to pursue the goal. She rose to fame starring on Euphoria in 2019 as well as last year’s vacation satire The White Lotus. Right now, she’s working on The Players Table, an adaptation of the 2020 novel They Wish They Were Us, by Jessica Goodman, that she optioned through her production company, Fifty-Fifty Films. She co-stars with the singer Halsey.
Here, Sweeney speaks to WSJ. about turning the Euphoria crew onto ice rollers and what happened after she recently spoke out about the double standards for male and female actresses who do nude scenes.
You recently said there are characters you play that you love and ones that you’re scared of. Which is Cassie?
I think Cassie is a bit of a mix of both. I love her because I feel her pain, I feel her loss, and I feel for her growth. But I’m scared of the choices she makes because sometimes she doesn’t think everything through.
What do you think motivates and drives her? Is it wanting to be loved or is it something more complicated?
She has always wanted to be loved, whether it’s from her mom, her sister, her dad, boys, herself, and the part that complicates it is she doesn’t have that love for herself, and she doesn’t know how to achieve it. She thinks it’s through other people, but it’s through herself, and she doesn’t like herself enough to be able to not need other people in her life.
Cassie has had a number of iconic, meme-able moments already this season. I was wondering how long you were actually in the bathtub during filming.
It was a good half a day or two, not too long. Get in, get out. It wasn’t that bad. It was fun because they had to cut the bathtub in half to have the camera in.
Did you expect the “I have never, ever been happier!” scene to go as viral as it did?
I did not. That was actually the first scene that we filmed. I was like, “Oh, my gosh, this is such a big scene to start off with. I guess we start out with a banger with Cassie.” As the season went on, I kind of forgot about it, and [now] it’s everywhere.
You’ve talked about making “character bibles” for each character that you play. What does Cassie’s look like?
Her book is very scrapbooky, a lot of very melodramatic quotes. She likes to pretend that her life could be like a very sad music video. So her book feels very teen angst, trying to glamorize something that’s broken.
You also brought your own beauty products into the scenes where she spends three hours every morning getting ready.
I had someone go and [pick up] the bin of products I have underneath my sink. I’m very similar to Cassie in that way, where I try as many devices and serums and I have to stay young forever. That big blue ice roller I got off of Amazon, and I use that every single day before I go to bed. Like that was my religion. And when I used that on set, everyone was like, “Wow. What is that?” And the following week, all the crew, everyone was [using] their blue ice rollers.
Do you think Cassie is capable of finding her strength?
I do think she is. Whether she does it in a morally correct way, that will be questionable.
What do you like or admire about her?
I admire how many times she tries.
Have any actresses reached out to you since you talked about the double standards of doing nude scenes for men and women, how men win Oscars for them while for women it often feels degrading?
How did it feel to talk about that in such a real way?
I think it’s a conversation that needs to be had, and I have no problem doing the scenes, especially when meant for the character and if it’s important to the character’s story. It’s such an interesting question—that no one has actually reached out, and now I’m like, what?
It surprises me. Do you have anything that you want for Cassie in the new season now that the show’s been renewed?
I don’t think like that, because of course I want Cassie to make the right decisions and come out, hopefully, on the better side; but also as an actor, I really love the stuff that’s juicy.
Here begins the second feature:
This Car Comes With an NFT (And No, It Isn’t a Bored Ape Picture)
By guest author George Downs from the Wall Street Journal.
Alfa Romeo says its latest Tonale model will use NFTs to record vehicle data and generate a certificate to guarantee the car’s overall status. WSJ’s George Downs explores how NFTs are being adopted by the auto industry. Illustration: George Downs
This is the starting point of the second item:
Tech Companies Face a Fresh Crisis: Hiring – Recruiters in tech are desperate for workers. But candidates are the ones who hold all the power.
By guest author Susan Dominus from the New York Times. Susan Dominus has worked for The New York Times since 2007, first as a Metro columnist and then as a staff writer with The New York Times Magazine. In 2009, she was a member of a team that won a Pulitzer Prize, for breaking news, for its coverage of a scandal that resulted in the resignation of Gov. Eliot Spitzer. In 2018, she was part of a team that won a Pulitzer Prize, for public service, for reporting on workplace sexual-harassment issues.
On some of her very long days, and most of her workdays of late are very long, Tiffany Dyba, a 39-year-old recruiter in New York, recalls with a little nostalgia a hiring job she once held at a luxury-fashion designer.
Back then, people were so eager to get her their résumés that a young woman once looked up Dyba’s photo on LinkedIn and then waited outside her office on Madison Avenue to intercept her on her way into work. On another occasion, Dyba, making conversation with a possible hire, mentioned that she had a fondness for toffee — and the next day, toffee, beautifully wrapped, appeared in her office. Back then, the people she was hiring were hungry, they were eager. There were flowers. Carefully crafted thank-you notes. Those were things a recruiter might not expect but might occasionally enjoy. A recruiter felt wanted.
But Dyba eventually struck out to work for herself, and then the world changed. A virus flourished, and office buildings emptied, with their tenants uploading their systems to the ether; the cloud filled and then it filled some more, and with that massive digital shift, Dyba found herself, a person who majored in psychology, who could be intimidated briefly by the “merge calls” function on her iPhone, working in a field so hot that it is sucking more and more people like her into its ever-expanding vortex: technology recruiting.
Recruiters working in technology these days do not receive candy, flowers or thank-yous. The recruiter is lucky if she can get someone on the phone — if she receives so much as an email in response. Technology workers need court no one: Along with microchips, toilet paper and Covid tests, tech workers will be recalled as one of the great, pressing shortages of this pandemic. Estimates of the unemployment rates for tech workers are about 1.7 %, compared with roughly 4 % in the general economy; for those with expertise in cybersecurity, it’s more like 0.2 %. Tech employees today tire of the attention from recruiters, the friendly hellos on LinkedIn, the cold calls (which Dyba does not make). “They think we’re like used-car salesmen,” Dyba said of her quarry. To be a recruiter in tech is to be an in-demand commodity for those companies doing the hiring but to feel like something of a nuisance — like an essential gear that emits a loud, irritating noise.
In late January, Dyba, working on contract with a tech company on the West Coast, sent out a mass blast on LinkedIn, tailored to reach data analysts, which is to say free of the kind of friendly, conversational fillips she might otherwise include (“Your LinkedIn profile looks amazing” and “I hope this finds you well!”). Data analysts — really, they just want the data. “Hi [name],” Dyba wrote in the message. “We’re looking for a talented Data Analyst to analyze huge data sets, build predictive models, and help us drive growth. I thought you could be a great fit.” The job she posted listed its selling points — the business had 400 % growth a year, the backing of a legendary venture capitalist, no limit to personal vacation days, full coverage of employee health-care premiums and the option to work remote or locally.
Dyba estimates that she sent the listing to about 75 prospective hires and received back maybe five responses, three of which were either a brief “no thanks” or the simple declination of her InMail message. A declination — that’s LinkedIn language for “Please, stop throwing all these jobs at me with employer-paid health-insurance premiums and unlimited vacation time.”
Recruiters are in such demand that they, too, are scarce, which means their fees have never been higher. In-house tech-recruiter salaries are up about 30 %, estimates Daniel Wert, who works at a boutique executive-search firm in the design community. Organizations looking for help in cloud and cybersecurity positions have increased fees they are offering to recruiting services to as high as 45 % of the first year’s salary, says Ryan Sutton, a district president in charge of technology recruiting for the staffing firm Robert Half. Dyba says she has more work than she has had since she started freelance-recruiting in 2018.
Dyba’s challenges — most tech recruiters’ challenges — go beyond simply finding humans. As the people talking to potential hires, recruiters have a big-picture view of just how quickly the market is currently moving, something they need to translate to hiring managers without giving the impression they’re doing a hard sell. Dyba recently wrote to an executive who was hesitating to make an offer on a hire who was slipping away, texting a kind of recruiter haiku: – we need to move – if we are gonna move – just thought I would tell you.
Recruiters are often in the position of breaking the bad news that a desired candidate has flat-out rejected an offer, often to executives used to having the upper hand in the market or to founders convinced their business is more innovative than Apple and with better snacks than Facebook.
Jana Rich, founder and chief executive of Rich Talent Group, a firm that primarily recruits executives to companies in the tech and consumer industries, says that even at the highest levels of hiring, she has never seen a market like this in 30 years. It falls on her, sometimes, to have what she calls “the truth talk” with a chief executive or board member: to break the news that qualified candidates have multiple — or sometimes preferable — opportunities. Now, she gently explains, an employer might have to think about taking a leap of faith on someone very talented but slightly less experienced. It doesn’t always go well. Following a recent truth talk, she said, the company put the search on pause, making it clear that “basically, ‘We, the company, don’t necessarily believe you,’” she said. “Like, ‘We think we can do better.’”
Pent-up demand after those early pandemic months when no one was hiring is part of the problem, Rich says. And a general feeling of pandemic malaise can help explain the shortage of potential hires — every so often, she reaches out to someone with a top-level job, only to hear, as she put it, “I don’t know if I have the energy in the tank.”
Highly skilled tech workers, for the most part, are not leaving the workplace — the money right now is simply too good (salaries have risen in some cities by as much as 10 %). They are, however, leaving the workspace, in droves, to work remotely, which is another aspect of the new world of work that recruiters need to communicate to founders and chief executives, some of whom are intent on getting the office back to what it once was.
“If you are not going to offer remote work, if you’re not going to offer at least hybrid, we can’t help you,” Sutton says he tells clients trying to hire software designers. Tatiana Becker, the founder of NIAH Recruiting, was called in to help another recruiter from a different firm, who had already contacted every local potential candidate to fill a chief-of-staff position at an online retailer that hoped to have its employees in the office full time. After Becker told her colleague that the employer was going to have to drop one of the three requirements to fill the position — ideally, the one that called for regular on-site work in New York — the client wrote her a snippy email making it clear that Becker’s help was no longer wanted: “Unfortunately the recommendation you made to drop one or two of our requirements,” the client wrote, “was frankly completely inappropriate.”
When working with one employer in a city that is not known as a tech hub, Dyba felt that she had to chip away, carefully, at the company’s insistence for on-site workers; one position had been open for six months. Dyba started showing the hiring manager the credentials for someone she’d found, but omitted a crucial detail. If the employer was interested, then and only then did she reveal that the talent was based in Florida or Boston. “I had to kind of say, ‘Listen, it’s costing more money right now for us to keep this job open than it would be for you to send someone a laptop and coach your leadership team differently about how to manage remotely,’” she said. She believes the hiring manager raised the issue with the chief executive; slowly, someone with decision-making power came around, and Dyba was able to start filling positions. When the pandemic ebbs and local workers are back in that office, 15 to 20 % of its work force will be remote. The market rather than Dyba changed the company’s workplace culture — a market of empowered technology workers who could pick and choose their employers, who could take or leave any job they wanted and were forcing a shift.
Dyba hit a low back in October, when after working for months to land a signed offer for a qualified candidate for one company, she then lost that hire when the candidate’s current employer swooped in with a generous, last-minute retention bonus. She had a signed offer! That had never happened to her before. Now she counts on nothing: “I don’t stop interviewing until I have a butt in the seat — like I am aggressively still looking for candidates even after we have a signed offer.”
Workplaces also keep shifting unpredictably in ways that wreak havoc on the hiring process. A business doesn’t have a vaccine requirement, then it does. Employees are told they can work remotely and then the employer starts floating the idea that everyone will need to come back. Between constantly changing conditions and the number of counteroffers that job candidates receive, Sutton says, around four in five of the deals his recruiters try to seal end up requiring last-minute finessing on some major point; that happened only about 30 % of the time before the pandemic, he estimates.
By late January, Dyba had been trying for several months, with mounting frustration, to find someone for a senior position for a high-growth start-up whose executive team insisted that the position be filled by someone willing to work at least part time on-site in New York. The calculation, when chief executives still make it, has become an interesting leap of faith. It reflects a belief that having a team on the ground, regularly working together, sharing the air and locking eyes across a conference table, will yield greater success than handpicking the most talented, experienced team a recruiter could possibly source from all 50 states and having them forge some new kind of work environment from their respective remote locales.
All day long, Dyba sent out feelers, and all day she got back messages on LinkedIn, variations on the same thing: “Is there any chance that this position could be 100 % remote?” one woman asked. “If not, I would not be interested in hearing more about the role.” Dyba visited the start-up’s New York office, which was, predictably, filled with great light and had Kombucha on tap. It was vast, the lease signed during the pandemic. It was also basically empty. Dyba had to wonder in what numbers even current employees would eventually return to on-site work.
At least that other client, the tech employer on the West Coast seeking a data analyst, was willing to let whoever filled that position work entirely remotely. In late January, around 5:30 p.m., Dyba got on a screening call with a potential candidate. By then, she had reached the stage of day when her hair was up in a messy bun held with a pen. She was working in her bedroom, in green thermal pants and a Henley — it was not a big Zoom day — and her ancient Corgi was snoozing by her side. The day had been nonstop, and she hadn’t paused to drink any water, which she was now compensating for by chugging from a bottle while the candidate spoke.
“If you wouldn’t mind kind of talking me through your background, I would love to hear a little bit more about you and what you’ve been doing,” she said. The young man on the other end of the phone was lovely and polite, with a Master of Science degree in business analytics. Dyba was immediately charmed, if only because — unlike so many tech recruits — he didn’t start the conversation by asking, within the first six minutes, what the compensation was. He spoke about his background but also seemed to have researched the business itself. The nature of work has changed so much that sometimes, she knows, the recruits don’t care: Their top priority is remote work; and if they are going to be doing data analytics at home, a basic disconnect from the larger business can easily set in. (Another recruiter said that when she sends out mass blasts, she often gets back emails that say only three words: “Rate? Remote? Client?”)
Dyba recognised that there were details on the young man’s résumé that the employer might consider less than reassuring — like the fact that his last job had the word “intern” in it. “My fear is that they’ll say he doesn’t have the experience,” she said of the tech firm. But still, he impressed her with his obvious intelligence, his sophisticated response to a question about machine learning. She would fight for him and suggest, “If you’re willing to take a chance and help someone start his career, I think it would be a great move.” Maybe they would listen, she thought. Maybe.
Here starts the last item today:
Reversal of fortune: How European software can play to its strengths
By guest authors Christian Behrends, Daniele Di Mattia, Jonathan Shulman, and Alberto Torres, all from McKinsey. Christian Behrends is a partner in McKinsey’s Düsseldorf office, Daniele Di Mattia is a partner in the London office, Jonathan Shulman is a partner in the Bay Area–San Francisco office, and Alberto Torres is a partner in the Madrid office. The authors wish to thank Christian Fielitz, Julia Werra, and Mateusz Wozniak for their contributions to this article.
A relative lack of top software companies threatens Europe’s economic competitiveness. To turn that tide, the private sector has to stop trying to play catch-up and take an altogether new approach.
In 2011, renowned US tech entrepreneur and venture capitalist Marc Andreessen published an essay entitled “Why Software is Eating the World,” arguing that value would shift away from traditional industries to providers of software and software-enabled services and products. 1
It was a prescient thesis. In the past decade, the software sector has grown at twice the rate of the aggregate of all industries 2 —a disparity only reinforced by the rapid acceleration in digital behaviors the COVID-19 pandemic has fueled. While the global economy shrank by 3.3 % in 2020 compared with 2019, revenue in the software industry grew by 2.7 % and is expected to grow at more than twice the rate of world GDP over the next five years. 3
What Andreessen did not assess, however, was how software might also eat away at the strength of certain parts of the global economy, such as Europe, for instance. By September 2021, seven of the ten most valuable companies in the world were software or software-enabled companies, reflecting the sector’s growing economic importance. And the year before, well over a third of the 100 most valuable companies in the United States came from the sector, as did about a quarter of those in Asia. In Europe, however, that figure stood at just 7 % (exhibit). Today, not a single European company features on the list of the world’s ten most valuable software and software-enabled companies, and there are just three among the top 20. 4
Those kinds of large companies can have a potentially disproportionate impact on a region’s economic competitiveness. The winner-takes-all dynamic prevalent in the software sector dictates that larger players enjoy significant advantages, creating powerful ecosystems that attract more partners and customers. And because software is largely a fixed-cost business, the margins they enjoy as they expand can be used to fund further innovation and expansion—including the purchase of smaller players globally. Hence, unless start-ups grow rapidly and become leaders themselves, they are likely to be acquired or outcompeted by industry giants.
Building more market-leading software and software-enabled companies is thus critical to Europe’s future in the sector and for its overall economic competitiveness and vibrancy. But how can this be accomplished? To identify solutions, we spoke with more than 20 key participants in the software industry, including CEOs who were leading or had led software companies in Europe and in the United States, investors, software experts, leaders of industry associations, and public-sector representatives.
European software solutions
Some solutions proffered by the interviewees were familiar, namely, calls for government assistance to help overcome barriers caused by Europe’s market fragmentation, labor policies, and certain regulations. They address the same barriers often cited as impediments to the development of AI, digitalisation, and start-ups in Europe, and range from more actively promoting technical fields of study in universities to providing fiscal and capital incentives for investors and streamlining and harmonizing regulations.
The interviewees further asserted, however, that the private sector—software companies, companies that use software, and investors—has a big role to play.
One common message was the need for a cultural shift. There was a perception that European investors and entrepreneurs had lower growth ambitions and, not surprisingly, a lower appetite for risk. Some interviewees felt Europeans’ discomfort with the risks associated with growth was partly responsible for what they see as a focus on short-term profit rather than value creation in the medium and long term. “European entrepreneurs tend to be conservative. They are often more willing to cash out than their American counterparts,” was the perception of one interviewee. “In consolidation scenarios, European companies often prefer to be the seller rather than buyer,” another commented.
European software executive perspectives
“Combining software expertise with the domain expertise of Europe’s strong industrial and engineering base opens the door for innovative collaboration, which is a huge differentiator in my opinion. If we can make Europe’s traditional industries truly connected and their products software-driven, then I believe we will see more global leaders in Europe.”–Sanjay Brahmawar, CEO, Software AG
“Europe’s time zone facilitates operating a global business, and flight options are good too. We can conduct morning meetings with Asia and afternoon meetings with the Americas, all during normal working hours.”–Rashmy Chatterjee, CEO, Istari
“Starting up in a small country has forced us to go international and learn to operate across multiple markets very quickly.”–Silvio Kutić, CEO and cofounder, Infobip
“We don’t have to look at Silicon Valley as the only model of success. European software companies need to be bold and build on their unique strengths to compete globally.”–Sanjay Brahmawar, CEO, Software AG
“We see a shortage of IT and AI skills in the market. Solving that problem will require more investment in recruiting, retaining, and developing the best people, and a commitment to evolve corporate cultures and make them more agile, innovative, and attractive to top tech talent.” –Sanjay Brahmawar, CEO, Software AG
“From a cultural point of view, I sometimes feel that the energy level is lower than what I’ve experienced in New York and Silicon Valley. There’s sometimes a lower level of ambition that doesn’t encourage as much entrepreneurship. There’s less acceptance of failure too perhaps.” –Rashmy Chatterjee, CEO, Istari
“In my view, Europe needs more diversity—not just of gender but diversity of background and points of view. The business climate in Europe is respectful and friendly, but innovators seemed to have followed a similar, defined trajectory. Enabling wider participation to new groups, who think differently and have different backgrounds, could result in bolder, game-changing ideas that have global impact.” –Rashmy Chatterjee, CEO, Istari
“It starts with education. We have great universities, but we do not always focus quickly enough on developing the core skills required for the future. We need to teach students how to work better in multidisciplinary teams, rather than in silos.”–Silvio Kutić, CEO and cofounder, Infobip
“We need to encourage more risk taking. Americans are often willing to take risks to grow fast. I think European entrepreneurs need to resist the urge to sell too quickly, often leaving a lot of the upside for the acquirers.” –Silvio Kutić, CEO and cofounder, Infobip
On a broader scale, the interviewees proposed an overarching strategic shift to help European companies succeed in the software industry. They encouraged the sector to focus on areas where Europe could leapfrog ahead by playing to its strengths, rather than trying to play catch-up in areas already dominated by others. “A strategy that entails copying the greatest US hits may, in some cases, have provided solid returns, but it is certainly not a formula for building software giants,” said one interviewee. At the same time, on a more practical level, the interviewees noted the importance of embracing state-of-the-art operating practices to help new companies scale rapidly and overcome the inherent disadvantages of a fragmented market (See sidebar, “European software executive perspectives,” for more views).
Our interviews and research point to three areas where Europe could take a lead and build large players by playing to the continent’s strengths: vertical B2B software, software platforms for digitizing small and medium-size enterprises (SMEs), and horizontal platforms built on European R&D excellence.
Vertical B2B software
The annual global market for vertical software, which powers industry-specific processes, currently stands at around USD 100 billion and is expected to grow at an annual rate of some 19 % over the next five years. That level of growth not only exceeds that of more general functional or horizontal software but would be strong enough to support existing software companies as well as a number of new, global champions. 5
Many of the largest B2B software companies have already made moves to establish themselves in the space. Salesforce has acquired Vlocity, a start-up with industry-specific solutions; Oracle has made multiple acquisitions of software companies that serve industries such as construction, communications, retail, and hospitality and travel; and SAP, Europe’s largest software company, has launched an industry cloud to provide solutions for many verticals. Notwithstanding, the field still remains relatively open, and Europe has grounds on which to build leadership.
It is important to note that Europe already has a strong position in a number of industry verticals such as automotive, construction, pharmaceuticals, and travel, giving would-be European software giants valuable access to target customers in order to understand their businesses and emerging needs and develop close working relationships.
Software companies could then choose to build and scale their own solutions or consolidate assets with other software companies to build scale. They could even join forces with companies in the target industries to create new solutions. And large industrial companies could leverage their own software assets by treating them as truly separate businesses. On these last two points, Europe has a strong track record with two of the three most valuable software companies in the continent (Dassault Systèmes and Amadeus) emerging from the initiative of the vertical industries involved.
Amadeus, a global airline reservations system, was formed in 1987 in a collaboration between Air France, Iberia, Lufthansa, and SAS. It has since grown to become a world leader in this segment, expanding to provide software for airlines, hotels, and airports and establishing itself as one of Europe’s largest and most valuable software companies.
Dassault Systèmes has carried off a similar feat in aerospace and heavy engineering. It was created in 1981 when Dassault Aviation spun off its software division in a strategic partnership with IBM, aiming to commercialize its computer-aided aircraft design software. Today, the company is the second most valuable software company in Europe and is recognized as a global leader in software for 3-D product design, simulation, manufacturing, and more. Recently, it expanded into pharmaceuticals, providing software for drug development and the development of COVID-19 vaccines.
Cross-border platforms for SMEs
SMEs—small to medium-size enterprises with fewer than 250 employees—dominate the European Union’s economy, accounting for more than 50 % of GDP and 65 % of employment. In the United States, the figures are around ten to 15 percentage points lower. 6 Despite that prominence, European SMEs have been slow to digitise, and large B2B software companies tend to not serve the sector, regarding it as a niche market in which local companies can compete more effectively. Nevertheless, European SMEs have been significant spenders in technology, with companies with fewer than 1,000 employees spending more than $30 billion a year on software alone (nearly half of which is spent on vertical- or industry-specific software). 7
That demand is likely to grow as the COVID-19 crisis has prompted SMEs, like larger organizations, to recognize the importance of digitization if they are to buy, sell, and collaborate remotely. Aspiring software champions have the opportunity to meet that demand and grow it further by building large SME platforms that span Europe and beyond and offer newer, more advanced solutions such as predictive AI or Internet of Things (IoT).
The largest software companies currently exploring this seemingly fertile ground are not European—Intuit being an example. And even Stripe, a software-enabled payments company now dual headquartered in the United States and Ireland, was started by its Irish founders in California. Notwithstanding, a crop of new European companies are emerging in areas from financial management to process automation. Amsterdam-based fintech unicorn Mollie, a payments services provider, is one such player.
Horizontal platforms built on European R&D excellence
European private investment in R&D lags well behind that in other regions—1.4 % of GDP compared with 2.2 % in the United States and 1.7 % in China. 8 Some interviewees noted that this was consistent with what they see as the short-term focus and moderate growth ambitions of European companies and investors. Others felt that European companies lacked confidence in their ability to innovate.
In contrast, Europe performs well when it comes to R&D in the public and educational sectors, spending 0.7 % of GDP compared with 0.5 % spending in China and 0.8 % in the United States. 9 This is reflected in its academic record: Europe is home to 16 of the top 50 global life-science universities and is recognized as a world leader in some spheres, such as cell and gene therapy (CGT) research. Between 2017 and 2019, it published some 120000 CGT research papers whose lead authors were affiliated with a European institution. Equivalent figures for US and Chinese papers were 72000 and 100000, respectively.
The interviewees felt that investors and companies could work more closely with European research universities and institutions to translate this kind of basic research into economic value and market leadership. In doing so, they could emulate the model used in technology hubs in Silicon Valley, Boston, Austin, or North Carolina’s Research Triangle, where local companies cofund many projects with top educational institutions, and investors are quick to identify new ideas and talent from those institutions to help create new companies and innovative products and services.
Similar hubs are being built in Amsterdam, Barcelona, Berlin, and Paris, and there is a “golden triangle” in England with strong ties to top-tier UK universities based in Cambridge, London, and Oxford. This hub kick-started the lion’s share of the United Kingdom’s approximately 100 unicorns and attracted venture capital worth
15 billion in 2020. 10 Notwithstanding, our interviewees believe that Europe’s academic strength is not being used to its full advantage. They felt that government promotion of hubs could help, but companies and investors are ultimately those that must forge the links.
European companies can also help shape the agendas of academic and research institutions, as these are not always aligned with future economic priorities. For example, as of October 2021, Europe’s share of patents granted in three high-potential technology areas—edge computing, computer vision, and blockchain—stood between 9 and 11 %. The US share was 72 to 88 % and Asia’s 8 to 19 %. 11
Operational and management best practices
European companies seeking to become big players would need to think about how to adopt the software industry’s operational and management best practices in order to overcome the challenge of a fragmented European market. They will also likely need to build scale—fast. Two practices stand out.
Scalable sales models. Chinese and US software companies can build scale quickly given their huge home markets. In Europe, analysis shows that it takes companies time to expand across multiple smaller markets—time software companies do not have if they want to compete for global leadership. One interviewee went as far as to suggest that some companies—those with novel, deeply technical applications that do not depend on local knowledge, for example—might even eschew the European market and expand in the United States first. “Country-by-country expansion within Europe is too time-consuming, giving US and Chinese competitors the chance to catch up and occupy those markets,” one CEO told us. A United States–first approach is one that many Israeli and Indian technology companies have used successfully.
Companies that focus on Europe initially could consider remote-sales-hub models to speed expansion, rather than rely exclusively on country subsidiaries. Often adopted by US companies entering Europe, the model entails creating pan-European, “inside sales centers” in locations where many prospective employees are multilingual—Barcelona, Dublin, and Tel Aviv, for example—and can drive sales remotely. Our analysis suggests that such a sales model can be 25 % more productive than a field-sales-only model if used with the right set of accounts and with effective operational practices and tools. In fact, operational excellence is such a critical differentiator that the sales ROI of the top quartile of inside-sales organizations are more than double that of the bottom quartile.
World-class product and development management. Interviewees pointed out that European companies are often slow to adopt the latest development tools and architectures. “The larger ones in particular are often less likely to move fast on new-technology adoption,” said one interviewee. This, in turn, impacts growth. On average, top-quartile software organizations grow roughly four to five times as fast as bottom-quartile performers with respect to developer velocity, our research shows, and these fast growers are largely based in the United States. Growth (or lack of it) then feeds into valuations: only three of the ten most valuable companies in Europe enjoy an enterprise-value-to-revenue multiple comparable to or higher than the median US software-as-a-service (SaaS) company. 12
Several interviewees emphasized there was a perceived shortage of product managers. “Europe has great talent, but loses more than it attracts,” said one, partly due to greater financial rewards elsewhere. “The critical combination of technical skills coupled with strong business judgment and an entrepreneurial mindset is hard to find in Europe,” said another. Interviewees wanted to see governments help build and attract the talent needed by, for example, promoting programs to help international software talent live and work in Europe or global or regional university rotation programs to expose promising European talent to more ambitious environments. But to win at a global scale, software companies would likely have to establish a high-quality, end-to-end operating model for product management, central to which will be talent management.
Israel perhaps serves as the strongest proof that smaller countries can thrive in the global tech economy. Its well-studied start-up ecosystem has produced outsize successes, with companies such as Amdocs, Check Point, and NICE now global software players, and the likes of monday.com and SentinelOne having had successful IPOs in the United States.
While the public sector can help European companies make a similar leap, entrepreneurs, investors, and private-sector companies have an important and urgent role to play too. They cannot wait for conditions to change before taking action. To prevent software gnawing away at the competitiveness of many of its industries and its economy, Europe must aspire to generate global software and software-enabled companies within the next decade by taking a new, bold approach that builds on its strengths rather than trying to make up for its weaknesses.
Newsletter of last Week
Your career doesn’t have to end at 60 – Why the Metaverse Will Change the Way You Work – The Next Austin? – What Companies will Look for in a Headquarters City – Harnessing the True Value of Corporate Venture Capital – Product Sustainability: Back to the Drawing Board https://textile-future.com/archives/84479
The highlights of last week’s NEWS, for your convenience, just click on the feature to read.
Swiss Georg Fischer expands footprint in South America https://textile-future.com/archives/84702
BASF launches RegXcellence® for plastic additives, a new service for Regulatory Excellence https://textile-future.com/archives/84668
Australia declares Koalas an Endangered Species https://textile-future.com/archives/84475
Climate change affects the diet of birds https://textile-future.com/archives/84696
Disney+ adds another 11.8 million subscribers https://textile-future.com/archives/84332
Annual Results 2021 of the Swiss EMS Group https://textile-future.com/archives/84377
BB Engineering GmbH delivers melt filter for PET recycling system to Indorama Polyester Industries https://textile-future.com/archives/84387
Clariant delays publication of Fourth Quarter / Full Year 2021 results https://textile-future.com/archives/84605
BASF replaces plant for 2-Mercaptoethanol in Ludwigshafen https://textile-future.com/archives/84609
BASF’s Care Creations® opens the doors to its virtual showroom in March 2022 https://textile-future.com/archives/84732
EU Winter 2022 Economic Forecast: Growth expected to regain traction after winter slowdown https://textile-future.com/archives/84336
Swiss Consumer prices increased by 0.2 % in January 2022 https://textile-future.com/archives/84358
EU’s net investment position -33 % in 2020 https://textile-future.com/archives/84423
Swiss Producer and Import Price Index rose by 0.6% in January https://textile-future.com/archives/84584
Swiss Average annual inflation for residential property in 2021 was 5.7 % https://textile-future.com/archives/84653
U.S. Retail Sales Grew by 3.8 % in January 2022 https://textile-future.com/archives/84735
Statement on talks between Björn Seibert, the Head of Cabinet of President von der Leyen, and Jake Sullivan, US National Security Advisor https://textile-future.com/archives/84471
European sustainable mobility awards: 12 cities in final race https://textile-future.com/archives/84636
Customer- and market-oriented systems solutions for the nonwovens world https://textile-future.com/archives/84401
Switzerland and Singapore jointly planning international fintech conference in Zurich https://textile-future.com/archives/84577
EU economy greenhouse gases near pre-pandemic levels https://textile-future.com/archives/84687
WIPO The Hague System – New Statistical Data for 2021 Released https://textile-future.com/archives/84613
Avery Dennison to accelerate Asia Pacific labelling and packaging ecosystem https://textile-future.com/archives/84455
BASF and Heraeus to form a joint venture offering world-class precious metal recycling solutions in China https://textile-future.com/archives/84369
Renault Group, Valeo and Valeo Siemens eAutomotive join forces to develop and manufacture a new-generation automotive electric motor in France https://textile-future.com/archives/84394
Baldwin partners with Blutec S.A. de C.V. to serve Mexico’s textile industry https://textile-future.com/archives/84418
BASF and NEVEON co-operate on mattress recycling https://textile-future.com/archives/84647
With the right partner to a global brand for success in the shoe fabric market https://textile-future.com/archives/84671
MassChallenge announces Partnership with Swiss Georg Fischer https://textile-future.com/archives/84712
BASF has developed new adhesives for labels that no longer interfere with paper and paperboard recycling https://textile-future.com/archives/84600
Milo brings plant power to Thailand https://textile-future.com/archives/84632
Swiss Empa: Ideas for decarbonising the Swiss energy system – Harnessing wind and sun to counter high-emission electricity imports https://textile-future.com/archives/84430
Swiss Empa: Aircraft security – Feel and see emerging microcracks in airplanes https://textile-future.com/archives/84744
Update of Swiss space policy and development of a national legal framework for space activities https://textile-future.com/archives/84718
Cole Haan launches its first sustainable shoe featuring dandelion rubber https://textile-future.com/archives/84434
Swiss Federal Council to seek participation in Copernicus https://textile-future.com/archives/84725
DIGITAL PRINTING ON TEXTILES: COMPREHENSIVE ONLINE TRAINING https://textile-future.com/archives/84676
Research: 55 % US broadband homes own smart TV https://textile-future.com/archives/84463
Data: Super Bowl ads reached 106 million viewers https://textile-future.com/archives/84728
EU Municipal waste generation up to 505 kg per person https://textile-future.com/archives/84681
SDC Webinar on Digital Dyeing and sustainability – imogo (February 17, 2022) https://textile-future.com/archives/84349
WIPO: More New Webinars Coming Up in Q1/2022 https://textile-future.com/archives/84382
Webinar on Overview of WIPO and its Activities – with a focus on the WIPO Judicial Institute (February 24, 2022) https://textile-future.com/archives/84594
Webinar on “Sustainable and Ethical Fashion – Certifications and market trends” (February 18, 2022) https://textile-future.com/archives/84852
EU Commission publishes analysis of trade and sustainable development policies around the world https://textile-future.com/archives/84366